NRF Asks Appeals Court to Uphold Order for Lower Swipe Fee Cap

January 17, 2014 10:09 AM Eastern Standard Time

WASHINGTON--(BUSINESS WIRE)--The National Retail Federation today asked an appeals court to uphold a
judge’s ruling that the Federal Reserve set its cap on debit card swipe
fees far higher than intended by Congress and that the cap needs to be
recalculated at a lower level.

“Nearly four years after the law was passed, debit swipe fees are still
far higher than they should be, and banks are raking in billions of
dollars in unearned profits every year as a result,” NRF Senior Vice
President and General Counsel Mallory Duncan said. “Instead of doing
what Congress ordered, the Fed gave in to pressure from big banks – and
retailers and their customers are paying the price. It’s time for the
Fed to follow the law instead of catering to the industry it is supposed
to regulate.”

A three-judge panel of the U.S. Circuit Court of Appeals is scheduled to
hold a hearing in Washington this morning on the Fed’s challenge of U.S.
District Court Judge Richard Leon’s July
ruling that the 21-cent cap that took effect in 2011 was too high.
The ruling came in a lawsuit
brought by NRF and other groups.

Under the Durbin Amendment section of the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010, the Fed was required to adopt
regulations that would reduce debit card swipe fees from an average 45
cents per transaction to a “reasonable” level “proportional” to banks’
cost for processing the transactions.

The law allowed the Fed to consider the incremental costs of acquiring,
clearing and settling each transaction but prohibited any other expenses
from being included. The Fed estimated those costs at an average 4 cents
and initially proposed a cap no higher than 12 cents, but eventually set
the figure at 21 cents after heavy lobbying by banks. The NRF lawsuit
claims the higher level includes
costs that were barred by Congress.

A 2013
study found the current cap is saving merchants $8.5 billion a year,
with more than two-thirds passed along to consumers, but that $12.5
billion could have been saved under a 12-cent cap.

Leon’s July ruling also agreed with NRF that the Fed’s regulations
failed to comply with a congressional requirement that at least two
competing processing networks be available for each transaction
regardless of whether consumers choose “credit” or “debit” when using a
debit card. The requirement was intended to lower costs by increasing
competition.

NRF is the world’s largest retail trade association, representing
discount and department stores, home goods and specialty stores, Main
Street merchants, grocers, wholesalers, chain restaurants and Internet
retailers from the United States and more than 45 countries. Retail is
the nation’s largest private sector employer, supporting one in four
U.S. jobs – 42 million working Americans. Contributing $2.5 trillion to
annual GDP, retail is a daily barometer for the nation’s economy. NRF’s This
is Retail campaign highlights the industry’s opportunities for
life-long careers, how retailers strengthen communities, and the
critical role that retail plays in driving innovation. www.nrf.com